A Guide to Renting to Family and Friends

January 25, 2023
How to Find the Perfect Housemate

Key takeaways:

  • Always sign an agreement, even if it’s your friends or family.
  • Rental income still needs to be declared.
  • Renting to friends and family can be easier as long as the legal terms are still in place to keep things fair.

If you don’t want to sell your abandoned apartment or go through the tedious job of contacting a realtor, renting to family or friends can be good. This is because everyone has a special bond with their previous home, and giving it away to a stranger can be difficult.

However, as the famous saying goes, ‘never mix business with friends’ does come with a warning. But don’t worry! We have made a complete guide on tips for renting investment property to family members without making it awkward.

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Can you legally rent to family or friends?

While you might think that friends and family are how you find the perfect housemates, think again.

First and foremost comes the legality. Normally, someone can’t live with you without being on the lease. Even if you are thinking of renting to family members, the transactions should be on paper and allowed by the local government.

So to answer ‘can I rent my house to my daughter?’ Yes, you can! There are no laws present in Australia that state you cannot rent your house to a family member.

In fact, mortgage lenders often see renting to a family member as a positive thing because it shows you have a stable income. The only places where it might not be allowed are if your mortgage lender says no to this idea.

Do I have to declare rental income from a family member in Australia?

If you rent your house to a family member in Australia, you will still need to declare this rental income on your tax return.

Additionally, if you don’t live in your home for a year before renting it out, you will be liable for capital gains tax.

How much rent should I charge a family member?

The solution to this query is not as simple as you may think. You should first consider the costs associated with renting out your property, such as mortgage repayments, insurance, and maintenance costs.

Once you have considered all of these costs, you can then think about how much rent you should charge for renting to family members or how you should split the rent. It is vital that you should not charge them less than what it would cost to rent the house on the open market.

This is because the ATO may view this as you are providing them with a ‘benefit,’ and you may be taxed on this.

Things to be mindful of while renting to family members and friends

renting to family

You should keep in mind a few things if you are thinking about renting your property to a family member or friend.

Sign an agreement

Firstly, you need to ensure that everyone is on the same page with the arrangement. This means having a written agreement in place that both parties have signed. 

It should include payment method, amount, maintenance charges, parking, space, etc. This prevents any confusion that may arrive in the future.

Get renters insurance

Even if the person renting your property is a family member or close friend, it is essential to get renters insurance. This is because it will protect you in case of any damage that may occur to your property while they are renting it.

Be professional

renting to family

Just because the person renting your property from you is a family member or friend doesn’t mean that you can’t be professional. This means treating them the same as any other tenant and following all of the rules and regulations that you would generally follow.

This includes conducting regular inspections, issuing notices if there is any damage, and enforcing the terms of the lease agreement.

Communication is key

One of the crucial things worth jotting down while renting your property to a family member or friend is to keep the ways of communication open. This means being able to talk to each other about any problems that may arise.

It is also important to have a great relationship with your tenant so that they feel comfortable coming to you with any issues.

Be fair

You need to be sure that you are charging them the same amount of rent that you would charge a stranger. Don’t lowball the rent price, and definitely don’t charge them higher than required.

Do your part

As a good landlord, you have to make sure that you keep up with all of the maintenance and repairs on the property. Replace burned-out light bulbs, make sure there are fresh batteries in the smoke detectors, and examine for any necessary repairs. 

This is because you don’t want your family member or friend to live in a property in disrepair. Never take them for granted.

Some people consider buying a duplex and renting half, so that not only are they rentvesting but living on the premises allows for more control of any hiccups that may occur.

Is renting to family members a good idea?

This all depends on the relationship dynamics between both parties. As usual, there are pros and cons to renting to family members or friends. Here are a few of them:

Pros of renting the house to family members

renting to family
  • You will have peace of mind knowing that your property is well looked after.
  • The rent will be given on time, and you won’t have to chase them up for it.
  • They are likely to be more understanding if there are any problems with the property.
  • You can get to know them closely and build a stronger relationship.

Cons of renting to family members

As you can see, there are both ups and downs to renting your property to a family member or friend. It would be best if you carefully weighed these up before making a decision. 

Need more renting advice? 

Browse our renting guides. They’re chock full of hacks and advice from industry professionals. And remember to download the Soho app for quicker browsing and property matching. It’s getting you into your dream home faster!

Soho is your expert team in Australian real estate, offering an innovative platform for effortless property searches. With deep insights into buying, renting, and market trends, we guide you to make informed decisions, whether it's your first home or exploring new suburbs.
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